Equation for computing home loan installment

Understanding Mortgage Payment Calculations

To figure out your mortgage payment, you must have the loan amount, interest rate, and loan duration. Here's how to calculate it.

Which Formula Determines Mortgage Payments?

Many individuals are curious about the formula used to calculate mortgage payments and the factors to consider. This is crucial for those planning to take out a loan for real estate purchases. The calculation involves three essential components: loan amount, interest rate, and loan term. The formula for computing mortgage payments is:

R=C*[(r*(1+r)^n)/((1+r)^n-1)]

For a quick calculation, you can utilize an online mortgage payment calculator.

Calculating Mortgage Payments Using a Formula

To manually calculate your mortgage payment, you need to gather specific data:

Loan amount: The sum provided by the bank, usually up to 80% of the property value.
Monthly Interest Rate: Can be fixed, variable, or have other structures.
Loan term: Expressed in months.

Various interest rate types include fixed, variable, variable with CAP, mixed, and fixed payment rates.

TAN (Nominal Annual Rate): Excludes all extra loan costs.
TAEG (Total Effective Annual Rate): Encompasses all costs, showing the total loan expense.

Formula for Mortgage Payment Calculation

Using the formula:

R=C*[(r*(1+r)^n)/((1+r)^n-1)]

Where:

is the mortgage payment.
is the loan amount.
is the monthly interest rate (TAN or TAEG divided by 12).
is the total number of payments (loan term in months).

For example, for a 100,000 euros loan with a 3% TAN and a 20-year term (240 months):

R=100,000*[(0.03/12*(1+0.03/12)^240)/((1+0.03/12)^240-1)]= 554.60 euros

In case of a variable interest rate, recalculate whenever the rate changes. When using a variable rate, update the calculation after each rate adjustment. Consider consulting a financial advisor for personalized guidance on loan options.